Agency

Question 1

What is needed to create a principal-agency relationship?

Answer 1

“ABC”
(1) Assent = both parties manifest assent (or consent) to work with each other
(2) Benefit = agent agrees that they will act for the principal’s benefit
(3) Control = agent agrees to work subject to the principal’s control

The principal and agent both consent that the agent will act for the principal’s benefit and that the agent is subject to principal’s control

Question 2

Who is not an agent?

Answer 2

An independent contractor typically is not considered an agent. The key factor in determining whether a worker is an independent contractor or employee is the level of control that the principal exercises over the worker

Question 3

When would a principal be liable for the torts committed by an independent contractor?

Answer 3

a principal generally would NOT be liable for the torts committed by an independent contractor unless:
* the duty assigned to the independent contractor is a nondelegable duty (ex. inherently dangerous activity)
* principal was negligent in hiring
* if estoppel is present (ex. if the principal holds out a contractor as an agent and there is reliance by a 3rd party)

Question 4

Liability on contracts entered into by agent

Answer 4

A principal is liable for a contract entered into by an agent, so long as the agent had some kind of authority to enter into the contract. The types of authority are:
* Actual authority (express and implied)
* Apparent authority
* Ratification

Question 5

Actual express authority

Answer 5

The agent is expressly given authority to act for the principal

Question 6

Actual implied authority

Answer 6

The principal’s conduct led the agent to believe it has authority. This can be by custom, past course of conduct by the principal, or if there is a necessity or an emergency circumstance

Even if it appears to be implied, a president of a corp likely has actual authority to enter into Ks in the ordinary course of business on behalf of the corp.

Question 7

Apparent authority

Answer 7

Look to communication between principal and third party

(1) the third party dealing with the agent does so with a reasonable belief in the agent’s authority and (2) the belief was caused by some act or neglect on the part of the
principal

principal can create apparent authority using words, written or spoken, that lead the 3rd party to reasonably believe that the principal consents to agent acting on principal’s behalf

Question 8

Ratification

Answer 8

Even if the agent doesn’t have any authority to enter into a transaction, the principal can ratify the acts of the agent (and thus become liable) by expressly or impliedly affirming or accepting the
benefit of it, so long as the principal knew the material facts and had the capacity to ratify it.

Question 9

Liability of agents on contracts, depending on whether principal is disclosed, partially disclosed, or undisclosed

Answer 9

• Disclosed principals (3rd party knows agent is acting on principal’s behalf + knows principal’s identity) : parties to the contract will be principal and 3rd party
• Partially disclosed principals(third party knows agent is acting on behalf of a principal but doesn’t know principal’s identity): parties to the contract will be principal, agent, and 3rd party
• Undisclosed principals (3rd party doesn’t know of agent’s status nor the principal’s identity): parties to the contract will be agent and 3rd party

Question 10

Liability of principal for torts committed by agent

Answer 10

An agent is liable for her own torts. There are also two ways for the principal to be liable:
* vicarious liability of principal
* direct liability

Question 11

vicarious liability of principal (respondeat superior)

Answer 11

“SMI” [scope of employment, minor deviation, intentional tort]
The principal is liable in tort if the agent or employee:
* was acting in the scope of employment (e.g., doing the job it was hired to do); or
* made a minor deviation (a detour) from employment; or
* committed an intentional tort only if it was (1) for “BAN”: the principal’s benefit, (2) bc the principal authorized it, or (3) is one that arose naturally due to the nature of the employment

Question 12

direct liability of principal (torts)

Answer 12

the principal is directly liable for its own negligence if it negligently failed to hire, fire, or supervise an agent.

Question 13

duties owed by agent

Answer 13

Duties owed by an agent include the duty of care, the duty to follow instructions, and the duty of loyalty (i.e., the agent must not engage in self-dealing, take an opportunity that belongs to the principal, or make a profit without
disclosure)

Question 14

Partnership

Answer 14

A partnership is the association of two or more people to carry on a business for profit as co-owners. Doesn’t matter whether the people intended to form a partnership

Question 15

What is needed to form a partnership?

Answer 15

Not much. No formalities like filing a certificate, unless a partner tries to form a limited partnership. If partner fails to file paperwork then a general partnership is formed by default

Question 16

Does profit sharing create a presumption that people are partners in the business?

Answer 16

Yes, UNLESS the profits were received in payment: of a debt by installments or otherwise, as wages of an employee or independent
contractor, as rent to a landlord, etc.

Question 17

What are some ways a partnership is presumed?

Answer 17

profit sharing, contributing capital, control, a partnership agreement, how title to property is held, etc

Question 18

Rights and duties of partners unless stated otherwise

Answer 18

• Partners have equal rights to co-manage in ordinary affairs. Extraordinary matters like admitting a new partner or selling land require a unanimous vote. Otherwise, a majority vote is needed.
• Profits and losses are shared equally unless otherwise stated (doesn’t matter if one partner contributed more capital than the other)
• There is generally no right to compensation for running a partnership—i.e., there is no general right to a salary unless otherwise agreed
• Each partner has the ability to bind the partnership under a theory of actual or apparent authority because every partner is an agent of the partnership

Question 19

Liability of partners in general partnership: contractual debts

Answer 19

Partners are jointly and severally liable for all contractual debts that are incurred by the partnership, so long as the person entering into the K had actual or apparent authority. (Remember: partners are agents of a partnership and can bind the partnership)

Note: if partners have an agreement among themselves that they will limit their liability, then that agreement is effective amongst themselves but NOT as to creditors.

Question 20

Liability of partners in general partnership: torts

Answer 20

Partners are jointly and severally liable for all torts committed by employees or partners in the
ordinary course of business or with the authority of the partnership. (And partners are always liable for their individual torts.)

Question 21

What is the procedure for collecting from a partnership?

Answer 21

The claimant must first collect from the partnership assets. The claimant may then go after the partners individually

Question 22

Liability of partners in a limited liability partnership (LLP)

Answer 22

To create an LLP, partners must register with the state by filing a statement of qualification. No partner
is personally liable for the obligations of the partnership (although partners are still individually liable for their individual torts)

Question 23

Fiduciary duties in a partnership

Answer 23

Partners are in a fiduciary relationship with one another and must act with honesty and in good faith. They are charged with the duty of loyalty, duty of care, and duty to account